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LAW AMENDING AND SUPPLEMENTING A NUMBER OF ARTICLES OF THE LAW ON FOREIGN INVESTMENT IN VIETNAM

LAW AMENDING AND SUPPLEMENTING A NUMBER OF ARTICLES OF THE LAW ON FOREIGN INVESTMENT IN VIETNAM

(No. 18/2000/QH10 of June 9, 2000)

In order to expand economic cooperation with foreign countries, serve the cause of industrialization and modernization, and develop the national economy on the basis of the efficient exploitation and utilization of the country�s resources;

Pursuant to the 1992 Constitution of the Socialist Republic of Vietnam;

This Law amends and supplements a number of articles of the Law on Foreign Investment in Vietnam which was passed on November 12, 1996 by the National Assembly of the Socialist Republic of Vietnam,

Article 1.- To amend and supplement a number of articles of the Law on Foreign Investment in Vietnam as follows:

1. Point 2, Paragraph 2, Article 3 is amended as follows:

"2. Geographical areas:

a/ Geographical areas with difficult socio-economic conditions;

b/ Geographical areas with exceptionally difficult socio-economic conditions."

2. Clause 1, Article 14 is amended as follows:

"1. The most important issues in the organization and operation of a joint-venture enterprise include: the appointment and dismissal of the General Director, the first Deputy General Director; the amendment and supplement to the enterprise�s charter, which shall be decided by the Managing Board on the principle of consensus among the Managing Board�s members present at its meeting.

The joint-venture parties may agree in the enterprise�s charter upon other matters which should be decided on the principle of consensus."

3. To add Article 19a as follows:

"Article 19a.-

Foreign-invested enterprises and parties to business cooperation contracts shall, in the course of operation, be entitled to alter their investment forms or conduct the enterprise division, separation, merger and/or amalgamation.

The Government shall prescribe the conditions and procedures for the investment form alteration and the enterprise division, separation, merger and/or amalgamation."

4. Article 21 is amended as follows:

"Article 21.-

Throughout the process of investment in Vietnam, foreign investors� lawful capital and other assets shall not be requisitioned or confiscated by means of administrative measures, and foreign-invested enterprises shall not be nationalized.

The State of the Socialist Republic of Vietnam shall protect the industrial property rights and ensure the legitimate interests of foreign investors in their technology transfer activities in Vietnam."

5. To add Article 21a as follows:

"Article 21a.-

1. In cases where a change in provisions of Vietnamese law causes damage to interests of foreign-invested enterprises and parties to business cooperation contracts, such foreign-invested enterprises and parties to business cooperation contracts shall continue to enjoy preferences already provided for in their investment licenses and this Law or have their damaged interests satisfactorily settled by the State through the following measures:

a/ Change of projects� operation objectives;

b/ Tax exemption and/or reduction as provided for by law;

c/ Damage incurred by foreign-invested enterprises and parties to business cooperation contracts shall be cleared against such enterprises� taxable incomes;

d/ They shall be considered for satisfactory compensations in a number of cases of necessity.

2. More preferential provisions which are promulgated after the investment licenses are granted shall be applicable to foreign-invested enterprises and parties to business cooperation contracts."

6. Article 33 is amended and supplemented as follows:

"Article 33.-

Foreign-invested enterprises and parties to business cooperation contracts shall be entitled to buy foreign currencies at commercial banks to satisfy the requirements of their current transactions and other permitted transactions according to provisions of the legislation on foreign exchange management.

The Vietnamese Government ensures the balance of foreign currencies for the particularly important projects in which the investment is made under the Government�s programs in each period.

The Vietnamese Government undertakes to support the balance of foreign currencies for the infrastructure construction projects and a number of other important projects."

7. Article 34 is amended as follows:

"Article 34.-

The parties to a joint-venture enterprise shall be entitled to transfer the value of their capital contribution share therein, but priority must be given to the other parties to the joint-venture enterprise. In cases where it is transferred to enterprises outside the joint venture, the transfer conditions must not be more favorable than those set for the parties to the joint-venture enterprise. The capital transfer must be agreed upon by the parties to the joint-venture enterprise.

These provisions shall also apply to the transfer of rights and obligations of parties to business cooperation contracts.

Foreign investors in enterprises with 100% foreign investment capital shall also be entitled to transfer their capital.

In cases where the capital transfer yields profits, the transferor shall have to pay enterprise income tax at the tax rate of 25%."

8. Paragraph 2, Article 35 is amended as follows:

"In special cases where it is agreed to by the Vietnam State Bank, foreign-invested enterprises may open accounts abroad."

9. Article 40 is amended and supplemented as follows:

"Article 40.-

Foreign-invested enterprises and parties to business cooperation contracts, which suffer from losses after making final tax settlement with the tax agency, shall be entitled to carry forward their losses to the following year, and such losses shall be cleared against the taxable incomes. The period during which losses can be carried forward shall not exceed 5 years."

10. Article 41 is amended and supplemented as follows:

"Article 41.-

After paying enterprise income tax and fulfilling other financial obligations, the deductions from their remaining income to set up reserve funds, welfare funds, production expansion funds and other funds shall be decided by enterprises."

11. Article 43 is amended as follows:

"Article 43.-

Upon remitting his/her/its profit abroad, a foreign investor shall have to pay a tax amount representing 3%, 5% or 7% of the remitted profit, depending on the level of capital contribution by the foreign investor to the legal capital of the foreign-invested enterprise or capital for performance of the business cooperation contract."

12. Article 44 is amended as follows:

"Article 44.-

Overseas Vietnamese who invest in Vietnam according to the provisions of this Law shall enjoy the 20% reduction of enterprise income tax as compared to projects of the same kind, except in cases where the enterprise income tax rate of 10% applies; they shall be entitled to the tax rate of 3% of the profit amount remitted abroad for remittance of their profits abroad."

13. Article 46 is amended and supplemented as follows:

"Article 46.-

1. Foreign-invested enterprises and parties to business cooperation contracts that use land, water and/or sea surface shall have to pay rental therefor. In cases where they exploit natural resources, they shall have to pay natural resources tax as prescribed by law.

The Government stipulates the exemption or reduction of land, water and sea surface rental for build-operate-transfer, build-transfer-operate and build-transfer projects; projects for investment in areas with difficult socio-economic conditions and areas with exceptionally difficult socio-economic conditions.

2. In cases where the Vietnamese party contributes capital with the land use right value, it shall have to make compensation for ground clearance and complete the procedures to obtain land use right.

In cases where the Vietnamese State leases land, the People�s Committees of the provinces and centrally-run cities where investment projects are executed shall organize the payment of compensations, ground clearance and completion of the procedures for land lease.

3. Foreign-invested enterprises shall be entitled to mortgage assets affixed to land and land use right value to secure loans borrowed from credit institutions licensed to operate in Vietnam.

The Government prescribes the conditions and procedures for foreign-invested enterprises to mortgage the land use right."

14. Article 47 is amended and supplemented as follows:

"Article 47.-

1. Export tax and import tax imposed on goods exported and/or imported by foreign-invested enterprises and parties to business cooperation contracts shall comply with the Law on Export Tax and Import Tax.

2. Foreign-invested enterprises and parties to business cooperation contracts shall be exempt from import tax for goods imported to create fixed assets, including:

a/ Equipment and machinery;

b/ Specialized transport means included in technological lines and transport means for carrying workers to/from working places;

c/ Components, details, knocked down parts, spare parts, fitting and assembling parts, models and accessories accompanying equipment, machinery, specialized transport means specified at Point b of this Clause;

d/ Raw materials and materials used for manufacture of equipment, machinery in technological lines or the manufacture of components, details, knocked down parts, spare parts, fitting and assembling parts, models and accessories accompanying equipment and machinery;

e/ Construction supplies which cannot be produced at home.

The exemption of import tax for import goods specified in this Clause shall also be applicable to cases of projects� scope expansion or technological alteration or renewal.

3. Raw materials, materials and components imported for production by projects in fields where investment is especially encouraged or in geographical areas meeting with exceptionally difficult socio-economic conditions shall be exempted from import tax for 5 years from the date of commencing the production.

4. The Government shall provide for the exemption and reduction of export tax and import tax for other special goods that need investment encouragement."

15. Article 52 is amended and supplemented as follows:

"Article 52.-

Foreign-invested enterprises and business cooperation contracts shall terminate their operations in the following cases:

1. The operation duration inscribed in their investment licenses expires;

2. According to conditions for operation termination stipulated in contracts, enterprises� charters or agreements reached between the parties;

3. By decisions of the agency(ies) in charge of State management over foreign investment due to their serious violations of law or provisions of their investment licenses.

4. They are declared bankrupt."

16. Article 53 is amended and supplemented as follows:

"Article 53.-

1. Upon the termination of their operation in one of the cases specified at Points 1, 2 and 3, Article 52 of this Law, foreign-invested enterprises and parties to business cooperation contracts shall have to conduct the liquidation of enterprises� assets and liquidation of contracts.

2. In the course of liquidating enterprises� assets, if the concerned enterprises are detected being in the state of bankruptcy, the enterprises� bankruptcy shall be settled according to the procedures prescribed in the legislation on bankruptcy of enterprises.

3. The settlement of bankruptcy of foreign-invested enterprises shall comply with the provisions of the legislation on bankruptcy of enterprises.

4. In cases where the Vietnamese party to a joint-venture enterprise has contributed capital with the land use right value, but the enterprise is dissolved or goes bankrupt, the remaining land use right value which has been contributed as capital shall be part of the enterprise�s liquidated assets."

17. Paragraph 2, Article 55 is amended and supplemented as follows:

"The Government shall prescribe the investment evaluation for the granting of investment licenses, the registration for granting of investment licenses; base itself on the planning and plans for socio-economic development, and fields, characteristics and scale of investment projects to decide on the assignment of investment licensing responsibilities to the People�s Committees of the provinces and centrally-run cities; and stipulate the granting of investment licenses to projects for investment in industrial parks and export processing zones."

18. Article 59 is amended and supplemented as follows:

"Article 59.-

The parties or one of the parties or the foreign investors shall submit to the investment licensing agency their dossiers of application for investment licenses according to the Government�s regulations."

19. Article 60 is amended and supplemented as follows:

"Article 60.-

The investment licensing agency shall examine the applications and notify its decisions to the investors within 45 days for projects subject to the investment evaluation for investment license granting, or 30 days for projects subject to the registration for investment license granting, from the date of receipt of valid dossiers. The approval decision shall be notified in form of an investment license.

The investment license shall be valid as the business registration certificate."

20. Article 63 is supplemented as follows:

"Article 63.-

Enterprises and individuals that have made outstanding achievements in their production and/or business activities, or made great contributions to the cause of national construction and development, shall be commended and/or rewarded according to provisions of law.

Foreign investors, foreign-invested enterprises, parties to business cooperation contracts, organizations and individuals, officials, State employees and State agencies, that violate the provisions of the legislation on foreign investment shall, depending the seriousness of their violations, be handled according to law."

21. Article 64 is amended and supplemented as follows:

"Article 64.-

1. The inspection of operations of enterprises must be conducted strictly according to the prescribed functions, powers and comply with provisions of law.

2. The financial inspection shall not be conducted more than once a year against an enterprise.

The extraordinary inspection shall be conducted only when there are grounds to believe that enterprises have broken laws.

When conducting the inspection, there must be a decision of the competent person. Upon concluding the inspection, there must be an inspection minutes and conclusion. The head of the inspection delegation shall be responsible for the contents of the inspection minutes and conclusion.

Those who issue inspection decisions not in accordance with law or take advantage of the inspection to gain personal benefits, harass or cause troubles to the inspected enterprises� operations shall, depending on the seriousness of their violations, be disciplined or examined for penal liability. If damage is caused, they shall also have to pay compensation therefor.

3. Foreign investors, foreign-invested enterprises, parties to business cooperation contracts, organizations and individuals may lodge complaints about or initiate lawsuits against decisions and illegal acts of causing difficulties or troubles of State officials, employees or agencies. The complaint lodging and lawsuit institution and the settlement of complaints and lawsuits shall comply with the provisions of law."

22. Article 66 is amended and supplemented as follows:

"Article 66.-

1. Basing itself on the principles prescribed in this Law, the Government may sign agreements with foreign investors or offer investment security or guarantee measures.

2. Foreign investment activities in Vietnam must comply with the provisions of this Law and relevant provisions of the Vietnamese law. In cases where a matter is not yet prescribed by Vietnamese laws, the parties may agree in the contract upon the application of foreign laws, provided that such foreign law application is not contrary to the basic principles of the Vietnamese law.

23. The phrase "profit tax" used in the Law on Foreign Investment in Vietnam is now superseded by the phrase "enterprise income tax".

Article 2.- This Law takes effect from July 1st, 2000.

Article 3.- The Government shall amend and supplement documents detailing the implementation of the Law on Foreign Investment in Vietnam to make them compatible with this Law.

This Law was passed on June 9, 2000 by the Xth National Assembly of the Socialist Republic of Vietnam at its 7th session.

Chairman of the National Assembly
NONG DUC MANH